Transcripts For BLOOMBERG Bloomberg Go 20160126

Is serious spike. Oil is already on the rise. Im not going to say i trusted, we have been to the stands before. Theres a lot more news we have to cover. Another snow day for federal government workers in washington, d. C. Offices will be closed while the city digs out from the blizzard. Air travel is slowly getting back to normal. Fewer flights were canceled yesterday. Theident obama has banned use of solitary confinement for juveniles and federal prisons. The Washington Post says the president says solitary confinement can lead to devastating imitating compensators devastating consequences. In denmark, the parliament is expected to let police these valuables worth more than 5,000 from refugees seeking asylum. 1500 from refugees seeking asylum. Danish citizens must sell assets before getting welfare. Our 2400 journalists and more than 150 news markets around the world, im vonnie quinn. Its now with matt miller. Aig, breaking news from they are going to ipo a 20 guarantorhe mortgage united guaranty is a first up towards completing the exit of that business area aig also announced 3. 6 billion in new costs to fill a reserve shortfall. Shares are up 1. 7 in the premarket. This will prove this will probably give us some role of trading. We watched the shares for you. Stephanie one of the reasons we are seeing this is a response to carl icahn. ,he head of the aig meeting could one say that aig is disrupting itself . You have carl with his foot basically on the ceos throat. What have you done for me lately . Not enough. This has to be assumed in response to that. Will the market feel like its enough . Hancock, the ceo, has to boost returns. Hes trying to save his job. Activist investing has gotten a lot more serious. He is being attention, the stock is up. We have a lot of earnings today. Lets go through a couple of the Big Companies out with earnings. Out with gamble came an estimate beating . 98. The ng is the beat, we havent had a lot of trading the premarket. , its the year to date been a tough market. Thats not bad for 2016. Down 3 . Procter gamble. Let me go through the rest of the earnings. Dupont came out with its biggest loss since 2008. If you adjust for a number of costs, it actually had a profit per share of the seven cents. That beats the street estimate of 26 . 27 . Not a lot of trading in the premarket. You can see your to date, it had a much more difficult time than Procter Gamble and a pot down 20 after pulling off the biggest merger of all time in the chemicals industry. Johnson johnson meeting with q4 earnings of 1. 44. We were looking for 1. 42. Johnson johnson shares down 6 year to date. Still waiting for premarket trade there. Finally, coach earnings are out this morning. Secondquarter eps, . 61. Sales were 1. 27 . [no audio] matt thats on the s p right now. There was a violent snap in crude morning, down 3 . It turned around and recovered, and i you see it up 1 at 30 and . 63 a barrel. 30. 63 a barrel. Saudi arabia coming to an agreement possibly for a cut there. It really drives the oil market. Screen ofw you a full all the asian indexes im looking at. We have massive moves. Csi 300, 6 the down, the shenzhen at 7 . Huge drops in asia overnight, which led to real volatility around the globe. Adding oil, its anybodys guess as to what happens. Stephanie another bit of news to break in the corporate world. It speaks to what you were mentioning with aig. Peter hancock, the ceo, taking action at a time when activist investors are on their heels. Lockheed martin saying they are separating, theyre going to be combining their i. T. And tech Service Units with lighters. Leidos. Ther seeing more ceos take a deep dive and try and improve operations and bottom line. This is another way we are seeing that. Its still early to tell. Lockheed shares are trading down slightly off of this news. David that just came across the wire, this is a reverse morris trust, a specific way of selling something without having to pay the taxes on it. Stockolders will get some at a chunk of cash, a 1. 5 billion. It sounds like lucky did not want to be in the i. T. Business anymore. It seems like lockheed did not want to be in the i. T. Business anymore. Stephanie this is what ceos should be doing. Tightening up their game, looking at what they have in the coffers and thinking how can i tighten the screws as much as possible. The last thing they want is a carl icahn or David Einhorn. David a core business they can make money off of. Stephanie in the premarket, slightly down. Matt id love to hear more about that trust, david, and what that means. Lockheed shareholders will get the majority of this business. As they spin off that tech business, that use the word combined. That is corporate speak for buy. Theyre basically going to buy this business. David if lockheed took it all in pat in cash, they have to pay taxes. This way, that doesnt happen. Should mention, we were opining on the motivations of Peter Hancock. We dont have to do that. Ceoy, Peter Hancock, aig will be sitting down with our own betty liu at 10 00 a. M. A big day for aig, the right day tasks are hancock what exactly is doing. Were going to take you overseas to china with the shanghai composite plunge. 615 on concert 6. 5 on concerns that capital could accelerate. En zone Robin Ganguly bloombergs own Robin Ganguly joins us. Its far more retail focus that we see here in the states. Robin what can i say, stephanie . We are heading into the year of the monkey. Ware monkeying around at the beginning. 6. 5 ,ore serious note, investors are really concerned about stability in the market. Their ability to protect policy. You cant to drive overnight 70 ,wing costs to 68 , sell on shore banks, restrict their onshore you on business and expect people to have confidence in the free market. Thats the main problem. Theres a lack of confidence in anything, any chinese assets. David in the Bloomberg News report, it said there was 1 trillionpital that flowed out of china. Are these new numbers . Robin yes. This is our colleagues at bloomberg intelligence. They have come up with this estimate of 1 trillion, thats about six or seven times the amount of capital that left china in 2014. This illustrates the huge turnaround. Chinese assets are finally beginning to trade like emerging market assets. Stable, they were a haven in asia, a haven in emerging markets. Now all this turmoil, since the august 11 devaluation saying they will allow Market Forces a greater say, going back on the words of the speak. It is creating a lot of turmoil, a lack of confidence. That is why so much of capital is flowing out of china. David i want to illustrate that with a chart from the bloomberg right now. If you take a look. In blue, i have the u. N. The yuan. This is the devaluation robin was talking about in august. In white, we have capital flows in china. Matt as a gets lower, money is coming out under the zero line. Its getting to be dramatic. We were talking this morning about the fact that a lot of the wealthy chinese are buying property around the world. That is boosting prices in real estate. We focus on that later. Do you see capital outflows . Do you see evidence of that we were Walking Around . Robin definitely. The problem is, when the imf on november 30 said the chinese in 2016, that insinuates that will be greater fraying of capital controls. Up of capital controls. We have the estimate of 1 trillion flowing into chinese assets over five years. There is also this pentup desire for investors in china to take their money overseas. You have to really be careful about how much money is going to flow overseas. See capital controls, you 1 trillion flow out an estimated 1 trillion in 2015. Controls are used further, it could be the year of the monkey. David that is bloombergs robin kong. Y in hong today is the first fomc meeting since the fed raise rates just in december. Will we hear a tinge of regret . Thats coming up next on bloomberg go. Vonnie welcome back to bloomberg go. President obama wants to make it easier for businesses to offer retirement plans to workers. Firms toallow small join together to form retirement plans, which would reduce the mystery of cost and compliance issues. Admin straight of cost and come administrative costs and compliance issues. Disney and ing for workers came on temporary visas. Hcl and cognizant say they comply with u. S. Laws. Billionaire john paulson is using his personal fortune to back Stock Investment losses. Hes had to cut assets by more than half. Is using his own investments as additional collateral for the firms credit line from hsbc. Thats a Bloomberg Business flash. David thanks, vonnie. I think its actually stephanie. Stephanie i appreciate that. With barryn off ritholtz next to me. Up. S what, giddy the fomc is meeting for the First Time Since they raise rates in december. It in the turmoil weve seen in the last few weeks, we are obviously asking the question did they move too soon . Take a look at what they said in davos. Made a mistake, growth is disappointed, inflation will go lower than higher. Now you have turmoil. Certainly, they cannot do four hikes, barges off the table, made by june. Maybe by june. Theyre going to do something, but there is something from the fed means we dont hike in march. Maybe in june. Tracy stephanie is noteworthy as those comments are, only he has assured opened with two buttons, while the rest of us were completely buttoned up. As i mentioned, Barry Ritholtz is here with our friend brendan greeley, who we havent seen in a while. Brendan you were busy in nightclubs at davos. Stephanie i was working. And carl riccadonna. Lets throw it in the middle of the pot. Janet yellen. Whats going to happen . Did she raised too soon . I dont think she raised too soon. The fed has a dual mandate, it has nothing to do with the stability of overseas markets. We have been an emergency footing as zero four seven, almost eight years. All the fed is looking to do is get off the emergency footing and do so in a way that is least disruptive as possible. Are they going to raise now, no. Are there more races coming this year . Probably. Is it going to be three or four . No one knows. Carl its not going to be three or four. The fed doesnt want to show buyers remorse or show signs of regret. They want to telegraph this was the right decision, they can hence of Downside Risks to the economy, but theres really no benefit for them to dial back those four rate hikes they were penciling and as of december. If you look at the futures, the next rate increase coming possibly as late as september. They wait until that Market Sentiment shifts back, and then they can say we will do less. And that it will be a surprise to the market, and that has some cachet. David janet yellen says she is data dependent. She doesnt say she is only partially due to dependent. Part of whats going on is the strength of the dollar and foreign markets. Of the data is whats going on with inflation. Stephanie did you just talk about yourself in the third person . Brendan the brendan. Then you will know that i have arrived. The brendan wants to take a look at inflation data. Fed has developed a case of the howevers. They say the things we have come to expect. At the downturn in inflation, its obviously consequence of lower oil prices. However, we been seeing more and more howevers, recently. They are worried that topline Inflation Expectations by the general population, by business owners, have lost their anger. We are seeing a lot more people talking about inflation anchors. William dudley gave a speech in january, he said when you look at the university of Michigan Consumer sentiment survey, is lower than it has ever been. Let lower expectations of topline inflation. When expectations are lower, that wreaks havoc in your down the line. True with Market Sentiment. The st. Louis fed pointing out Market Sentiment is very low. Lower than it has been historically. Haveeal question is, Inflation Expectations slipped their anchor . Barry the fed has been lowering expectations as measured by the university of michigan. Stephanie dont talk university of michigan. Core cpi and december, we finally end of the year above the feds inflation target. We were 2. 1 . This was a hollow victory for the fed. This is all almost predominantly due to rent pressures. The rent is two. High. Darn high. Stephanie we get to go to commercial. Brendan greeley, carl riccadonna, thank you. We make it very haircut during the break. Y awe may get barr haircut. Stick around, you are watching bloomberg go. We are hoping for grain markets with oil heading in the right direction. Stephanie youre watching bloomberg go. Johnson johnson Fourth Quarter estimates boosted by drug blockbusters. With us now is dominic caruso, chief financial officer. 3000 job cuts in the medical Device Division recently. I was not going to help you, Going Forward how is that going to help you Going Forward . Dominic you are referring to the restructuring we Just Announced. We think that restructuring is the right step to take to position the business. We are strengthening our go to market models and free up some resources that can be reinvested in the business to drive growth. We think its the right move for this business. David please take us through the relative growth in the three main areas. Because youve had some disparate growth levels there. Dominic sure. I couple of things. We have some acquisitions in investors that cloud the picture. To give you a perspective on it, our pharmaceutical business overall is about 11 growth. Thats very strong. We did divest a product line early in the year which reduces that growth rate a little bit. About 11 in pharma. In the consumer business again, excluding acquisition to investors, about 4. 2 growth. Nice growth. Medical device business, lower growth, about two point 5 , excluding acquisitions and investors. Stephanie in terms of specific drugs, what are you betting on . Eli lilly and pfizer are making great strides. A strong fromve simple business, a big pipeline. We Just Announced we plan to file 10 new products by 2019, billionwhich have a 1 potential. The first of those that we just got approval for recently is an important product for multiple myeloma, which we think will be a big success. Stephanie given how global your business is, whats the impact of the strong dollar . The 2015, its been a negative impact on sales around 7. 5 . We are projecting based on current rates that impact would be as low as 1. 5 going into 2016. David you have the event of a strong Balance Sheet. What are you going to do with that cash . I know you have a stock buyback program, but thats not going to consume it all. You have a strong Balance Sheet, and are always looking for ways to deploy capital in a way that creates value for shareholders. We pay a healthy dividend, always looking for acquisitions to bolster growth. We will do that at the right price on the right time. We are patient. In the meantime, we return cash to shareholders like you just our 10 billion Share Buyback we are currently executing on. Stephanie what is your take on china . How bad is the economic slowdown . Have seen a slowdown in china. Review china as a longterm play. Demographicsh the there, that plays well with vehemence need for health care, that plays well for a business. Perspective, china represents currently only about 5 of our sales. So any immediate slowdown or shortterm Economic Conditions will not have a Significant Impact on business. David dominic caruso, Johnson Johnson ceo. Thank you for joining us. More on the fed in the markets coming up next on bloomberg go. Stephanie we have to give a shout out for new jersey. The only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Stephanie david welcome back to bloomberg go. Futures are up slightly, and we thejoined once again by economists Barry Ritholtz. Lets get started with vonnie quinn. Vonnie thank you. A new poll shows donald trump dominating the field of republican president ial candidates. The new cnn or see national poll, 21 41 back to trump. Is a 20 , alluz of the candidates are single digits. In texas, a abortion activist has been indicted by a grand jury. He is charged with tampering with the government records. The videos accused planned parenthood of illegally selling fetal body parts. Plan parenthood was cleared of wrongdoing. It may be a little while before things are back to normal on the east coast. 48 hours after the blizzard, travel is still a mess. Airlines delayed or canceled more than 2500 flights. Many schools are still closed. In washington, d. C. , federal government officers remain shut by morebal news powered than 150 news bureaus around the world. Im vonnie quinn. Breaking news with matt miller. Matt sprint and 3m right now. Let me give you sprint. The company sees fullyear adjusted at 9. 5 to 10 billion. Total net additions in the quarter were hundred 91,000. Was 1. 9 billion. The question is what going what is sprint going to do about its workforce . You want to watch sprint for job cuts. The company has already said it plans to cut 2500 jobs as part of a plan to cut 2. 5 billion. If you type in sprint or any company on your bloomberg gominal and then type in oss , you can see a depressing chart of when the company has cut jobs as far as the run of its share price as well. I got that up on my terminal if you want to take a look at that. Meanwhile, 3m had fourthquarter adjusted eps of 1. 66. Was 1. 62. E these are beating estimates. Sprint was gaining in the premarket, 3m ginny in the premarket as well. Futures as you guys been mentioning today are up right now. We are seeing positive moves in the u. S. Market. Even as you had this huge tumble and Chinese Markets overnight. Stephanie i want to take you back to sprint right now. We are seeing the default risk, credit default swap in five years widen out 1. 3 times on this negative credit outlook. We are also seeing the Short Interest in sprint hit an alltime high, 20 times the average daily volume. Thats very big. Its not just this as negative news and we are not feeling it in sprints, we are more than not feeling it. You are seeing major investors at this point really saying this isnt working. I can hear jon ledger of tmobile cackling somewhere at this moment. Touted screw for years. Their ceo has only been in that seat maybe year and a half. Its a tough road. David this is nothing new for sprint. For sure. Ts there are only so Many Companies who can aggressively pick up market share. Its a zerosum game. Cap and is like verizon have been the winners in the space. Sprint, not so much. Got seven cells, three buys, sprint news to turn it around. Barry theres a huge Short Interest in this. They do own spectrum, they do own valuable assets. You never know when someone is going to come along and say this is cheap enough that we could pick this up. At 2. 72, thats not exactly where i would want to be short. Stephanie m a is the killer for all shortsellers. Single digits is a tough place to play on the short side. Stephanie its time for the morning mustread. Our team is traveling back from london today, the gulfstream hasnt hit yet. So barry is providing our morning mustread. I believe you are the one who penned it. This time of year, every is. The market likes this candidate, the market doesnt like this candidate. These polls are why the market is having volatility. When you look at it, its just the worst form of demagoguery and Market Analysis there is. Viewers can spell demagoguery while i share my favorite quote from various peace. I repeatedly heard and read the same silliness. The market is tanking because of the rise in wildly and protectable donald trump on the right side, and socialist Bernie Sanders on the left. I can say as far as the market is concerned, the whole political horse race and even the election itself is more or less meaningless. Lets break this down. S,st week in. Most in davo the fear of donald trump was everywhere. Is that just talk as far as the market goes . Barry a lot of it is just talk. Strip everything away, strip trimmed mbast, trump is a moderate democrat with his policies. Ignore what he is saying to the base. All the things that he is talking about, we are not going to build a wall or deport 14 million people. We are not going to have a 10 trillion tax cut. All of these things are great talking points on the stump. But theres essentially zero chance of any of it happening. David taken away from the personal. The range of uncertainty in the selection seems pretty good. Side, sanders on one donald trump on the other. Apart from voting on candidates, can you take down to zero the chance that people are hesitant . Barry lets look at Bernie Sanders. Hypothetically, in some alternative universe, Bernie Sanders is elected president of the United States with a Republican Congress and the republican senate. What is he going to get past . A fairlyrget obama is moderate democrat, and he barely was able to get anything through the Republican Congress. Nothing is going to happen with standards. Lets step way back. The big thing we need to focus on is when markets are doing well, its because the economy is doing well, people have jobs, they are seeing wage increases. Consumers are spending, and profits are high. Favorends to work to the of either the incumbent party or the status quo. This has been a sort of lumpy, even recovery. There are lots of pockets of discontent. Some people are finding resonance with what trump is saying, some people are finding resonance with what sanders is saying. But those really are not what is driving the overall market. Stephanie both of those caps who are supporting donald trump and Bernie Sanders are really unhappy. And they are unhappy about our economy. Matt i just wanted to ask if theres any kind of stockholders almanac view on what markets do in election years. If you look at the last four cycles, you can see that we were up at the end of 99, we were up at the end. Basically the clinton elections. Did i just say clinton . The two bush elections. 2008, we were up again. It looks like three quarters of the time we finish election nears going up, at least the trend is going up. Bottom line is corporate profits are doing well, that works in the favor of your of either the incumbent or the status quo. Rate is falling and theyre just turning negative primarily due to energy, that tends to work to challengers. Theres also another issue of the past eight years has been the highest in partisan rancor, the worst sort of gridlock. This has been six years of donothing congress. I think the public in general are just tired of it. The whole idea about hope and change, the electorate is seeming to say we really want to change induced the, and if the traditional politicians can get it done, cant get it done, we will go to an outsider. David if its not politicians, its oil. As we speak, branches up, debbie tias up a bit under 1 this morning after a rock said saudi iraq saidnow morph saudi arabia is now more flexible. Blas is here. Didnt give any details with the flex ability months. I remain very skeptical that actually we have seen any movements to what the production cap. What were hearing for what were hearing saudi arabia says it will not cut for others to take its market share to make room for iran, and russian the saying they can survive this crisis and it will give way for opec to move. David one thing that would cut supply is if Energy Companies had trouble and had to cut back production because they were going out of business or had to restructure. Where is the leverage situation right now in Energy Producers . Javier i think you are right. We canend of the year, see some thing actual from opec, because we can see u. S. Production coming down because shale producers have gotten in trouble. The best indicator is not the price of oil at 30, but the level of the known investmentgrade of u. S. Energy companies is trading right now is close to 20 . In 19. 7, its the highest in 20 years, its higher than the financial crisis in 2008, 2009. Thats a very good indicator of pain in the industry. These companies are not going to be able to raise more into the market. And when they run out of cash, we will see a significant drop in u. S. Production. When we look at some of these countries that are a little tight for cash, iran, can theyussia really afford to stop producing oil, even at 30 . Are they going to actually cut back production . I assume they are going to need the money more than they need the supplies in the ground. Javier those companies try to maximize reduction to try and read every dollar. So far, these countries need to stop and think is a good to sell to barrels of oil at 30 or better to sell may be a barrel and a half of oil may be at 50 a barrel. I take in account the production and actually making more money, i think that consideration is going on right now in many opec countries. I think one of the most interesting comments this morning from the Oil Ministers of opec came from the minister of finance and acting will minister of kuwait. They are using for planning purposes for 2016, and oil price of 25. Thats still you what opec is thinking. David at 25 dollars, there are some companies that will not be able to afford to stay in business. Be specific, gives examples of some of the most leveraged people who will have to say uncle first. Can survive,il Companies Like exxon or chevron will be able to continue raising and is going to be painful but they will survive. If you look at u. S. Shale producers, thats where we are going to see the pain. You think about companies at this company, five years ago aboutad a total debt of 1. 5 times. Today, more than four times. His company is highly leveraged. The losses are mounting. I think companies are going to have a very hard time with 30 will remaining for the rest of the year. Stephanie frequent mack brown freeportmcmoran has a lot of volatility. Return, we have got to talk apple. Set to report First Quarter earnings after the bell today. What can we expect . Buying opportunity, selling opportunity . Our houses look like apple stores. Theres got to be value in that. There you go. This mightthe green, be the second worst anywhere weve seen in history, but maybe, just maybe, thats turning around. David welcome back to bloomberg go. Apples shares of taken a beating, falling more than 11 since the companys last earnings report. As because of concerns that iphone sales may have suddenly dropped off. We know how important those art apple. The company is set to report First Quarter earnings after the bell today. Giles coming overseas Technology Coverage for Bloomberg News joins us. Give us a little bit of a preview on what we should expect from or look for. Tom the things to keep in mind for apple, you got to look iphone sales first and foremost. They cap for 66 of the total revenue of the company. There have been concerns about production being cut back. Concerns about demand going to 2016, our People Holding off, is the market saturated . Our people waiting for the iphone seven . How robust as demand in china, another big factor. And finally, the outlook for 2016. David havent we seen this movie for . Apple come surging back. Is this different . Tom its a little early, you have to wait until september, 2016, to we get a big iphone. And how iterative or revolutionaries that going to be . Thats something we dont have a lot of insight to. There is a drop off after the holiday season. So yes, early 2016 will be a little bit bleaker than the Christmas Season. The problem is, how bad was the Christmas Season . Has it been saturated . Stephanie lets look at apple at all the money they have. Back in december, for we saw apple and the rest of the world take a lay down, in 2016, this could be the m a year for apple. Possibly buying gopro, tesla, box. Look at apples dna. They never make huge acquisitions. Its always these small, Strategic Acquisitions that will fit. Like beads. Take wee we didnt would see massive Companies Like tesla remember, gopro was the darling of darlings with that handsome ceo when they went public. In that story has changed. Tom gopro is a one trick pony. They have a single camera, they are great if you want to leave out of a plane or run laps at white rock with matt miller. But where else is the rest of the innovation . Hearing on what a mess the iwatch was. But we see sales of swiss watches, they have been in freefall. I wonder if thats a coincidence that the iwatch comes out in the swiss watch manufacturing im old school. I like a swiss timepiece. But apparently the next generation could care less. Stephanie the next generation doesnt wear watches at all. Its the iphone, it is your watch. Stephanie they were barry they will wear a fitbit. David is another way to tie them into the ecosystem. I will answer calls and listen to music on my watch. Really going to change the game for them. Its making an impact, they are doing well. Apple talks how they like whats going on with the smart watch. But it hasnt really changed the conversation. And buying gopro, thats not going to change the conversation either. Even if they did it, it wouldnt cost that much, no sweat. It doesnt really change the fundamental story. This is fascinating. You can see this on bloomberg with anr. This is the stock price and white. It continues to come down. 10 year to date. Meanwhile, Analyst Recommendations continue to go up. There are 85 buys now. As they raise the recommendations, they are lowering their price targets. So the street as saying by the stock, but its going to be worth a little bit less than we previously had thought. These guys are looking pretty far ahead. Theyre looking at new products that supposedly are coming down the pike. The apple car, anything we hear on that, nothing were going to hear it today. In the coming months, that is something a lot of people are going to want to hear. Matt didnt ahead of the project is leave . Barry what does that tell you about how soon we are going to see an apple car . Stephanie one employee. Tom its a pretty big project. Barry its not something thats going to happen in the next year, its further down the pipeline. Do accelerate, do form partnerships . That is something that apple will rely on. Tom put their software into the cars, not make the cars themselves. That keepsrumor coming back, time and time again. Its a lot for them to swallow. Stephanie look at the equity markets. Things keep getting cheaper. Tom giles joining us, and barry, we are not letting it go just yet. When we come back, we take a look at walmart. They came, they saw, they conquered, now they are leaving town. The impact of the bigbox chains new strategy. We have that next. Lets take a quick look at futures, in the green, the s p down, the nasdaq on the green. We are looking at these gains. In general, this is being driven by oil. Oil taking a nice leg up today in the equity markets. The argument has been that oil in equities are moving in line. We like it when that movement is headed up. You are watching bloomberg go. Stephanie in todays star wars, wars, were talking about walmart shifting away from supers that small stores to focus on supercenters. Announcing it will close all 100 to express stores. Shannon pettypiece joins us now. We know Doug Macmillan has a new strategy. This is big. Shannon its really big for the towns theyre leaving. Weve known for decades what happens when walmart comes into account. They put pressure on small momandpop businesses, sometimes writing the local hardware store, Grocery Store, pharmacy out of business. Usually walmart stated. You would have the walmart to go to your food and medicine. In now, the company is starting to close stores. Doug macmillan has indicated he is going to be thinking more thoughtfully about what stores they want and what stores they dont. Now we get to see what happens when walmart leaves town. In some of these towns, its really not pretty. Walmart with some of the small stores came into small towns in texas and North Carolina and georgia in a matter of months in some cases, the local Grocery Store and pharmacy were out of business. Now with walmart leading, you have a town with no Grocery Store and no pharmacy. David was this a matter of the express idea just not working or retail being under siege and it was about time to go in . Shannon walmart says its not anything but a shift in strategy. Saying we are going to focus on breadandbutter, what we do best, the Grocery Stores and fees mediumsized Grocery Store type chains that they have been operating out of. They said its not something thats going to be part of our strategy. It was a quick aboutface for walmarts started Opening Smaller Stores in 2011. They came into these towns over the past five years and then all of a sudden, in a matter of months, reversed course and said we are out of town. Have been highly criticized in the last six months, at a time when activists are knocking on retailer stores, you saw David Einhorn with Terry Lundgren and macys. Have bigger mistake does the walton heavily multifamily have . Shannon the waltons control the majority of this company. Unlike a lot of big retailers, walmart has some time. The family is very involved in the company and the board. The ceo isions that making, you can guarantee the ball family has signed off on those. As long as the ball family is happy, the ceo will have some time to get his job done into what he needs to do. David have a over expanded . Barry are we saturated . Go to three, can home depots, five minutes in any direction. As walmart done that . Shannon walmart says 90 of americans live within 10 minutes of a walmart. Of the reasons they were Opening New Stores was the u. S. Sales growth was going and they were saying where can i put another supercenter . Andd Shannon Pettypiece Barry Ritholtz. Thank you for being with us. The Central Bank Begins its two day meeting on bloomberg go. David the feds next move, when policymakers start meeting today, i much of an effect will market volatility have on them . Chinese stocks plunge as investors worried that capital of lows will increase. And behind closed doors as greece struggles to survive a mountain of debt. From yanis for focus yanis varoufakis. Welcome to bloomberg go. Im david weston. Stephanie im Stephanie Ruhle. Asited as im he excited as i am to hear from excited tots im hear from brendan greeley. Stephanie many times he rides motorcycles. You know doesnt write a motorcycle but does play a fiddle, vonnie quinn. Vonnie less icon in iowa, Bernie Sanders took part in a town hall for the democratic president ial candidates. He said he is confident voters will back his plan for singlepayer medical coverage. Bernie sanders it is time in my view, for us to have adverse to take on the insurance companies, and provide health care to all people at an affordable cost. Vonnie the Iowa Caucuses are next monday. It may be a while before things are back to normal on the east coast. 48 hours after the blizzard, travel is still a mess. Airlines delayed or canceled more than 2800 flights. Many schools are still closed. In washington, d. C. , federal offices remain shut today. So our schools and d. C. , baltimore, philadelphia. In southern california, officials issued a message and hit movies as they hunt for three escaped inmates. Police say family, friends, or gang members are hiding the inmates. They been on the run since bringing out an Orange County jail on friday. Howard my more than 150 news bureaus around the world. And vonnie quinn. Now to matt on the markets. Matt lets look at what happened in china overnight. You can see the shanghai, down 6. 4 . Other markets there are down more than 7 . That spooked markets around the world. European markets initially were down further. Right now, the live dax trade is only off by 25 . The reason you dont see a oil isp in europe the reason. We had a 3 drop in crude, and all of a sudden, a violent turn around. Crude was gaining for most of the morning, or at least the morning i considered since the show started. 30 anow, its down to barrel, 20 a barrel. Thats why we had gains in u. S. Futures. The stake a look at u. S. Futures right now. Not the strength of gains we saw when crude was up at the high of the day. But it is still green across the board on futures in the u. S. Theings have been beating street estimates. Its not a fantastic story. Procter gamble, for example, the estimates by cutting costs and raising prices. This, ia great chart on recommend checking out her story on the terminal or on the web. Cuttingbe just by costs. These are costcutting stories, where Johnson Johnson is selling more of its arthritis and other drugs. Johnson johnson is looking more at an organic growth story, and the rest of the companies out with earnings today are really looking at a costcutting story. David thanks, matt. As we have said, the fomc is meeting today. Thats for the First Time Since they raise rates in december. Four furthercted rate hikes. 2016 follow market seems to have done that work for them already. Financial conditions of tightened material buyer estimations, the economic equivalent of four rate hikes, just coming from volatility. Now we talked to whats going on with the fed great brandon, you are the expert. Its going to be behind closed doors. Heres what we are looking for. Barry Deutsche Bank dominic brendan they did all this work to find out what we already knew to be true, which was that december was a dovish hike. They gave lots and lots of dovish signals, and they hiked anyways. S . Vid competition linguist brendan how dovish are they feeling on whats not going to be a hiking meeting . What im looking for that statement how were they are about inflation. This is one of the things we havent seen. If we can bring up the chart we were talking about earlier, one of the things we have been looking at is central bankers are looking beyond the top light inflation to core inflation. They are not seeing the inflation they want. One of the things weve seen in the grain is what we had that is consumer Inflation Expectations from the university of michigan survey. William dudley at the new york fed is looking at that and saying its lower than it has ever been. Its possible that Inflation Expectations may have lost their anchor. When you look at the market, jim bullard of the st. Louis fed was talking about that. You are seeing more and more in open speeches is they are worried that its not just about the price of oil. Its Inflation Expectations they lost control of. Stephanie one of the great things about working for pimco is you get to be at the beach. Futuresm looking at fed are pricing in a hike until september of 2016. Rich janet yellen likes to say the fed is data dependent. The data has been soft, not only globally, but in the u. S. We get a gdp report on friday. Obviously, march is looking less likely than it did several weeks ago. We dont want to overreact to this. The underlying u. S. Economy is growing at about 2 . To look through shortterm volatility. If this persists throughout the year, they wont be able to look at it. , as a John Micklethwait practical limit to what they can do this time around. How much of a looking across the atlantic . Mark theyre looking at the idea that deflation is something he wants to kill. Janet yellen has always been driven by that idea that inflation is painful and deflation is a killer. He live with that. I think with a will probably do is try to look through this volatility, theres no real getting around the fact that inflation isnt really taking off. That pushes you back out, i think. Stephanie matt. Matt we were having our argument about this earlier. Carl riccadonna was the loudest among us. Im looking at the average joe in this country looks at cpi, and if you talk to the average joe, he also says, where she also says that prices are higher, regardless of what the fed will tell you or what we on bloomberg tv say. Climb above 2 when we are also worried about Inflation Expectations going the other way . Rich we have two economies. A Service Economy in a good economy. Goods inflation is negative and has been for some time. The services economy, which is the bigger part, does have higher inflation rates. The other thing of course as well as the feds preferred pce measure is a little bit more of a longishs concept. The cgi is easier to understand. The challenge the fed may face in coming months and years is that those two indexes can and do diverge. The feds measure is lagging behind, you do get into a situation where can medications get more challenging. Stephanie productivity and growth are two things were trying desperately to focus on. Many are criticizing the measures used. Our own charlie rose talked to mom elerian last night. Take a look. There is no doubt that the road we are on now which has been artificially supported by central banks, we have brought growth from the future and Financial Investment from the future, thats going to end within the next few years. The exact time is very hard. I can see is lasting more than three years. This is from someone who believed in the new normal, the concept that we could have a low growth world forever. I dont think we can anymore. David lets come back to today and tomorrow. Market three years is just far enough out that in three years, we will all be dead. David or at least will have forgotten what you protected. Lets connect to the practicalities. What is the best and what is the worst . What is dovish and what is hawkish . Actually see we some thing about Inflation Expectations, meaning they are really worried about deflation. This is what we saw for mario draghi yesterday, speaking to a german audience saying no, seriously, we have to take this seriously. Orthey dont talk about core inflation anchors, if they dont talk about expectations, if they dont use the word credibility, which we saw last time, that means they arent as worried about it as im suspecting from the outside. Brendan they have to thread a needle. They are not going to do anything, but they are setting up to medication for the rest of the year. If they are too gloomy, they risk making itself the filling. They want making it self fulfilling. We want to give themselves the option to hike in march. Stephanie wordsmithing talent. Doesnt that blow your mind that Janet Yellens job is really to oversee the country, for the economy, what it means to regular americans . Brendan this is what central banking is. Those who can, hike, those who cant, communicate. Central bankers have a doing that for a long time. What janet yellen needs to do is try and talk this lineup. You can see the expectations for a rate increase have flatlined. Obviously for the january meeting. That is a no go at this point. Futures are pricing in the possibility, over 50 possibility of a rate hike until september. At least you have the probability of a cut act on the single digits. , during theber tailspin of the markets in the first two weeks of the year, the probability of a cut for this meeting was up at 10 . Stephanie best janet yellen stalks. We always let our boss talk. Mark i bet janet yellen will come up with some new word which will completely bewitch brendan greeley. It will be something along the lines of prudence or some new word, and we will all start becoming completely accessed by this word. Thats the way what she is generally operated. Stephanie super caliph adolescent. I will emerge tomorrow with a new word. At what extent does she have to think about option alley optionality. From day one, she said her remarkable run. Every meeting is live, and yet so far, she has been able, through the rhetoric that stephanie just mentioned, the wordsmithing, to sort of get her committee to support her. And yet give yourself the option. Mark i bet she looked up the word indecision and then coming up with robust indecision. Every time she gets a word she likes stephanie if you didnt think fed meetings werent sexy enough , we are working in the the source. Thank you for joining us. Cleary ned brendan when and really brendan greeley. And we dig into the chart that terrifies emerging markets. Lets stick a quick look at features, not up, not down, but flat. Slightly in the green, which i like. Theres really not much happening. A moment of indecision as more and more investors sit and scratch their heads and wait for fed minutes. You are watching bloomberg go. Stephanie welcome back. You are watching bloomberg go. If youre wondering why investors seem so worried about china, and the rest of the emerging world, consider this. Companies there have piled on more risk than at any point in the last decade. We are talking leverage, baby. For more, lets bring in mark manas anita jimena zuniga. Traditionally, when we look at emerging markets, there is less leverage than regular corporate america. Why do we pile the risk of the fact that its in the emerging world . Thats not the case today . This is the aggregate Balance Sheet of emerging markets. Thenare more levered companies in developing markets, despite the fact that they are operating at a more volatile market. Mark i know thats an old logic. Mark that levered to be ok if there are a lot of growth of 11 to build up their equity. The growth is slowing. David its also to some extent the result of aggressive Monetary Policy that makes money cheap and people looking for high yields. Jimena one of the emerging markets that was one of the main risks highlighted by the imf in its most recent economic outlook. One of the analysis they connected was to determine why it had increased so much. Thats really quadrupled in the last 10 years. 2004nt from 4 trillion in two over 18 trillion in 2014. They determined that what was driving that increasing emergingmarket corporate was the fact that financial conditions were so lax, it can storage encouraged firms to borrow. And now theres a greater risk. David how much of this dollar is denominated . Mark a lot more is dollardenominated. Means as the dollar get stronger, these debts become part of the service. This is exactly the reason why you should be frightened of emerging markets if you are an investor. That level of debt increasing, we see it in every previous emergingmarket crisis, its always the dollar denomination aspect and its the fact that people of overleveraged when they think the world is going to continue convincing themselves that this time its different. Stephanie how did this happen with this this time its different . The developed world is not corrected the mistakes they made in the past. What joke to the emerging markets miss . Jimena emerging marketsjimena were thinking that conditions are very strong, growth would continue. I think a lot of firms and governments were perhaps not brilliant enough. They assumed the growth has gone crisis before 2008, 2009 to 4 in 2015. Thats a big line. That in a lothows of ratios like emerging markets, corporate debt to gdp ratios that went from less than 50 over 70 in emerging markets. Even sovereigns, although they have behaved a little better than emerging corporate. David this is lumping all emergingmarket companies together. Is there a variation of leverage from company from country to country . Mark i did look at china, china has more leverage. If emerging markets on average have about . 90 of debt for dollar of common equity, in china, its more than one dollar. More than one to one. World, in my part of the china has increased its corporate debt over 20 , but all the other mainland economies, brazil, mexico, she late, e, with the exception of argentina which was secluded. David thats Mark Whitehouse and jimena zuniga. When we come back, we tell you the top stories bloomberg go. On. Stephanie david welcome back. You are watching bloomberg go. Now to look at the top stories. With the top five, led by the vicks. Vix. Paulson pledges personal holdings to back his firm after assets fall. Hes a very wellknown Hedge Fund Manager who got the subprime short trade right in a very big way. It was founded 13 years prior, mostly focused on the merger arm. Had paulson is saying weve lumping returns, investors are feeling uncomfortable. So he is backstopping this with his own fortune. Hes busily sending the message be patient. I believe in these investments. Hes very long puerto rico, hard assets, real estate in puerto rico. Hes not going to turn around his investments. He is saying just waited out with a. In 2008 when so many investors were forced to sell, if they had just held on, they wouldve crusted in 2009. John paulson is sending that message. I think its quite interesting. You have this element of the rockstar is Hedge Fund Manager. The fact that he can come out and say this stuff and people immediately Pay Attention, including us. Its a big deal. David you feel a lot better with someone putting their own money behind it. Stephanie its one of the core things we have seen. People dont want to invest in the fund unless the manager has skin in the game. Fund this is a hedge manager in china who has returned 6200 of his pic so far. Turn in this year. He used to be a factory worker, it was long when the market was going up, he got out in may or june, he was short when the market was this is the next ordinary story. Even i love the quote while i go down, i. E. Often like ants. He has kept on betting. A former factory worker. On this particular one, notwithstanding all of his brilliance, he does have that slight element of a bull market thing. A guy from the factory becomes a huge hit. He may be the Warren Buffett or john paulson. It could be bull market this is the moment arrogance. More could be extraordinary. David or it could be symptomatically the larger issue with Retail Investors in the stock market. So many people going in and essentially gambling. John, your story. John this is one to do is shale, with private equity coming in effectively to try and help keep shale going alive. Its a tiny bit, a very small amount, a bit like having an airbnb in your house. They are renting out the room and bringing in ivan equity to finance shale fields. If they got good property, good land just keep it taking over, perhaps waiting for the oil price to come back. Stephanie like it david like a timeshare. John the endless inventive nature of capitalism. Stephanie the fall has to do with the price of oil. If you can wait out this cycle, there is some light at the end of this tunnel. The question is, can pes they view . Save you . John they think they will drive oil down briefly to clear out the markets. And then they think we will come back up. Stephanie im going to ask if b b, or n a nice twitter shares of taken a beating. Stephanie you are watching bloomberg. Lucky us, bloomberg editor in chief as with us. We had the good fortune of spending last week in davos we. Will give you highlights. Lets get you some first word news. Vonnie a meeting today highlighted the longstanding littleknown relationship between the vatican and iran. 40 president had a minute meeting with pope francis. He asked the pope to trade for him. The vatican said iran should play a role in fighting terrorism. The Islamic State has set up an Operations Command to plan more terrorism attacks in europe. As according to the eu crimefighting agency. The agency says the Islamic State wants to carry out more attacks similar to the one in paris that killed 130 people. The Prime Minister of malaysia of allegations that he stole almost 700 million. The attorney general said that money appeared in a private account and was donated by the saudi really royal family. The question now is why was he given the money . Bloomberg news power 24 hours a day by 150 journalists around the world. Im vonnie quinn. Matt i want to show you a couple stocks are moving. Some interesting stories this morning. Coming out with its fifth quarterly loss after 4. 1 billion in charges. A quarterly loss after adjustments was only two cents a share. They were looking for . 18 a share in losses. Freeportmcmoran up 6. 6 . If you look at my terminal, i want to show you that freeportmcmoran incurred 500 stocks last year. He fourth worst performer freeportmcmoran is a big loser. That could be one of the reasons people are getting in. Note amazon was the secondbest performer of last year. I will come back to that in one second. Take a look at sprint right now. Sprint actually came out with numbers that were better than had been anticipated, both on the earnings front and on additions as far as customers are concerned. This is a company that we were talking about an hour morning meeting this morning that has 31 billion in debt. Again, if you look at my terminal, you can see the dd i. S. Function. Masses company with massive amounts of leverage. You can see when it is becoming do. A lot for the softbank telephone operator. Cut at this, this Company Costs in order to be the street estimates for profits. The shares are up 1. 7 in the free market. I want to come back to amazon. There are a number of notes on amazon today saying the losses this year to date are overdone. 700, 6. 94. 694. It has come down to 602. Bernstein and Pacific Crest and other analysts have been saying it has been overdone and the company will do better when it comes out with earnings on thursday and the street is expect them. Stephanie thank you. As i mentioned, last week, we rocked the World Economic forum in davos. John, i want to point out you had some of the most extraordinary panels when we were there including some of the most powerful. I wish i could say people in banking, but indeed, it was the men. The bank of america ceo and blackstone ceo. You were discussing everything. Regulation and the state of u. S. Banks. , phil, what moment brian, steve, what stood out the most . End, there was a civilized discussion between Steve Schwarzman and the euro regulator. The basic argument was shorts and was saying i dont invest. I dont get into anything which you regulate. I want to stay out of banks. That is how i make my money. The reply was yes, but, the reason why we have to regulate banks is because banks cost taxpayers a lot of money. That element of friction between the capitalism trying to push forward and on the other side the regulators saying we also have to pick up the bill is very interesting. The other bit is the whole element everyone is looking, everyone is thinking what are the areas where Silicon Valley can come and begin to push into the areas where we are worried about . Is a goatee Money Transfer . Currencies . Any of these areas . It ties into the first debate. Maybe regulators are giving Silicon Valley a slightly easier and then the others. Had a discussion on bank of america on syntactic or lets look at that. I come at it and say what does it really do . The intimacy of the distributed power of the smartphone in the hands of a person is so different from anything we face in our business careers. The ability to communicate realtime, the ability to transact realtime, i think it will take a long time for regulation to fully understand that as it will take a long time for us to understand it. If you look at our customers, we have 19 million mobilephone bankers, 30 million computer bankers. The amount of volume on those devices is over 30 a year. Stephanie really embracing syntec, when you look at the big banks, it is a buzzword like we heard from retail companies, getting all over digital. They missed that boat. Our Banks Like Bank of america, are they really and it . John two things have happened. There has been a change in the rhetoric. It really does matter. Jamie dimon and others suddenly switching from regulation to saying syntec is the next bit. As brian was saying, they are trained to get involved into it. They have is they dont come with all of the accumulated costs, all of the accumulated elements and regulation. Behind it, there is a big issue about how easy it is to persuade people to change banks. Would david give of his Checking Account to go to one of these new people . Maybe not. Would you take foreign currency through it . Yes. Bly, it is those kinds of areas people are pushing. The phone is the key. Stephanie phil winters weighed in on Standard Chartered. Take a look. Phil ultimately, if we do our jobs well, servicing customers, helping them manage their data, restore value, these are things that are enduring in terms of the role of a bank. Betec applications will introduced to that process. Of course, there is a disruptive element. Thats attractive element will challenge regulators along the way. In many ways, we at Standard Chartered art thinking about syntactic as almost the app store where we have a front end and we have to protect that all the time. Anid stephanie asked important question. Do the banks get it when it comes to syntec . Even if they get it, what technology did in publishing and what it is doing in video media is it reduces the barrier to entry so there are a lot more competitors. At illuminates geography. A real challenge from them. Suddenly, the idea that you can get money and services that you never thought in some ways, finance is one of the most sticky areas. You have geographic clusters, wall street, the city of london. Finances are used to being in the same place. Some elements of what people are is trying toec challenge it. It is still incredible he small, but like all of these things, it acts on the edge. I have an inkling that this is an area where the europeans might be ahead of the americans. That is the strange bit. Spanish banks, british banks, there are ones which are beginning to experiment with new ways of getting money to people. Stephanie experimentation in media is different than money. One of the reasons we care so much about the fdic is because we are protected. Are people really willing to have their money somewhere in the cloud . Somewhere in the ether merely connected to their phone . you would trust me, stephanie. No, i think youre right. For regulators, there is a serious, academic thing. On the one hand, they want to encourage things. On the other, they do want to this advantage the people were more regulated. You dont want to end up with Stephanie Ruhle believe you and me. Stephanie think about the Greek Economy. Greeks are still keeping money under the mattress is. They dont even want to go into a bank. If they are not come to bow at regular to banks, come on. At africa. Mobile money. David india. Bangladesh. Time to turn to another big bank. Matt miller is good to take us there. Matt thank you very much, david. We talking tech and advertising as Morgan Stanley analyst brian novak. I want to start with a shift you are seeing in the advertising landscape. How is it and who are the winners here . Brian this topic dovetails well from the fintech topic in that there is a Disruptive Force in the way Online Advertising is being taught. We are shifting away from direct salespeople, people buying advertising to programmatic at buying. That means that Online Advertising is increasingly being bought through machine and automated options. To the point where in 2015, 40 4 of overall Online Advertising dollars were bought through this these machines. We see that going to 70 by 2020. The biggest two winners are facebook and google which make up 65 of this overall market within advertising tech. Matt facebook is a winner, it is a behemoth. What about a company like twitter which is substantially smaller but has been having serious issues really . Brian layer under way on twitter. We are under way on twitter. They are still having issues monetizing their user base and growing their user base. I think the growing power of the scale that they are seeing at facebook and google, both through this advertising Tech Technology and everything bills Everything Else they are doing to monetize their platform is taking dollars away from other players and from twitter. In many ways, as concentration in advertising dollars toward the big two players, facebook and google, is in some ways making life harder on twitter. Matt you are overweight on yahoo if im not mistaken. Where do you see the opportunity there . Brian we are overweight. I think the biggest opportunity is for yahoo to relook at how to manage that business. We see a lot of opportunity for potential cost reductions and restructuring were there has been press reports that the company could be said to reduce its headcount by 20 . We think that would materially increase. The thing we are looking for yahoo heading into earnings next week is an outlook on their Strategic Vision into 2016 and 2017 and how they are going to optimize that space and grow that topline in this environment. Matt amazon seating earnings coming up on thursday. We were highlighting the stock earlier that had fallen from an alltime high of 700 a share down to 600. Where do you see for thursday . I know you like this stock. Brian very bullish on amazon into thursday night. We think there is a strong topline trend and profitability trend that will continue into 2016. The big two trends we look at on amazon are samestore sales. We analyze amazon as a retailer. The longterm average growth for amazon samestore sales is about 10 . Those numbers are now accelerated to 27 growth largely because of prime. Amazon is in the business of behavior modification and getting people to spend more and more. That is what is happening and it is leading to bigger topline and driving profitability higher. We think amazon says up well. Matt let me bring you back. Oh. I watched the men in the high castle. A lot of people are now using amazon as a media content provider. Can they capitalize in the ad tech trend that you are seeing help of google and facebook . Brian i love men in high castle. It is a great show. Amazon has never been focused on the advertising business as much as you would think. They have experimented with Advertising Products on a platform, but they have never had an idea of taking the advertising and using the data off the platform. I think because they like to retail dust control the retail transaction and point that it is one of the scenarios where amazons annual advertising revenue is only about 700 million on a platform. If they ever took all of their purchase data, because they have the walmart equivalent of data online, and decided to use that on other websites, there would be advertiser demand. For now, they are not focused on that. They want to keep people buying things in their ecosystem and control that. Matt thank you for joining us. Brian novak from Morgan Stanley. He is very bullish on amazon going into earnings on thursday. On, he still is underway twitter. I know Goldman Sachs just put out a continued by on twitter even though they say the risk has been raised with continued management turnover. To point i just want out the news we got last week. I love it when there are buyers and sellers, that is what makes markets. David einhorn, known activist investor, short seller, has come out. He is specifically short amazon, short netflix. These are two names you really see a short Public Interest in. Important to note that. Finally, a big investor saying he just paid, show me the money. David coming up next, we talked our favorite subject. Wall street. Ceos and big banks got there face last week. We will talk about that on bloomberg. Vonnie welcome back to bloomberg. Here is your latest Bloomberg Business flash. Aig will take its mortgage interest of public and will sell an advisor network. Carl icahn has been pressuring aig to break up so that it can boost returns. Billionaire john colson is setting to use his personal fortune on a hedge fund firm. They have cut assets by more than half. He is using his own investment as additional collateral for the firms credit line. New figures show amazon prime reaches more than 1 5 of american adults. Prime is atirm says 54 million members at the end of last year. That means nearly half of u. S. Households have prime. Amazon prime gives customers Free Shipping and access to video. That is your latest Bloomberg Business flash. Stephanie not make, i am not an amazon primer. I was never a netflix user intel met convinced me and i became a huge orange is the new black fan. We have to move on. Wall street ceos getting their pay packages cut. They may need free ship that shipping. Andman sachs cut pay by 4 james morgan state was 7 slashed 7 . Now, lets put it in perspective, were not talking about zero bonus. Are not talking about a change in lifestyle. They are still safely in the 20 million club. Slashes of four and 7 is modest. Her compensation board saying we have to be at least somewhat mindful for how business will look. That is how you saw gorman shakeout. Jamie dimon, on the other hand, got 35 pay increase to what he 7 million. Stephanie what did jpmorgan do . Hugh they beat the index by nine points. Stephanie isnt this what we want . Delly want to see ceo compensation tied to the performance . John it has to be relative stock performance. There is no reason why you are be carried up for this. If you outperform compared to the index, you should get paid. We have to accept there is a of market happenings. It is hard. Somebody would pay him quite a lot of money to run something else. David this is almost not at all about the money. These people are wealthy individuals. It is about bragging rights with their buddies. Hugh it is about ego. It is about paycheck. It is about what it shows about the job you did in the previous year. If you are an ms shareholder down 18 in 2015, and you see gorman is down 7 and youre still getting paid a nexus of 20 million, that wont sit well with you. Stephanie how is it reflected in what the rank and file were paid . Variedxtremely throughout trading. It depended on whether you were in equities, fixed income, how your company get a rope your jpmorgan, for instance, they were heroes for keeping their bonus pool flat. Stephanie heroes to their employees . Hugh exactly. Argument, the ceos did better than their employees. David did Morgan Stanley cut their bonus pool overall . Hugh we dont know yet. David the ego thing counts. That might be the most powerful motivator for ceos. John it is like a football manager. , a run these companies football, regardless on which side of the atlantic youre on, if you are the guy managing the team, you get all of the praise when it is going well and you get dumped on when they go badly. This is part of the thing. Ego is, we can all agree, part of running an investment bank. Stephanie you are taking a huge amount of risk they are it when you become a middle manager at a bank, you are now assuming the risk of those who said anything. It would make sense that the leader of the organization would get more of a bump in the rankandfile. If you are the rankandfile, you want to see that your leader is still an alpha male or off a person. Or alpha person. Stephanie i appreciate that. It several years ago when Morgan Stanley was getting kicked, if we are not making money, dont pay me. Thank you for talking about wall street pay. Now we have to take you to greece. Greece buto today, the Austerity Party take office to it since then, the referendum, reelections, and a bailout package, we are no going to london where our own guy johnson is joined by the former greece minister who said no to austerity. Guy thank you very much, stephanie. Int time we spoke, we are your office in the finance ministry in athens. It is one year the anniversary this week. Any regrets as you look back on what happened during that period as to what was handled with credit . Plenty. We failed. We were elected with a mandate to reboot the Greek Economy. A fiscal recon solvation fact recon unfortunately, the other side, the lenders were not interested in having a rational discussion we felt to convince them. The problem is that given that we are continuing along the path of the field program, greece is continuing to seek sink deeper into the inflationary spiral. We missed this chance quarterly, creditors, lenders, the eu, we miss this great opportunity to stabilize greece and take it off the headlines. So youre how to have a program on greece again. Saying isyou are giving seacrest no chance of facing death fixing greece. Yanis god and his angels cannot fix greece. Guy . And his angels are not in charge. Yanis the point im making is even with god and his angels in charge, it can be done. Lets be practical. It cant be done. Can a broken economy like greece be mended by pushing every good and service to the 28 bound . Can we possibly fathom recovery when businesses, small, medium, and large, were forced in the last couple of months of 2015 to prepay 100 of their Corporate Tax for 2016 in 2015 . This is what you do to a company if you want to crash it, not if you wanted to recover after eight years of permanent recession of continuing drops in nominal gdp. Guy the debate tonight is on the pension reform of greece. The creditor say you need to go through. His Alexis Tsipras on the wrong side of that debate . Yanis he knows exactly what needs to did he done except the already capitulated. Funds thats older capitalization depleted completely in 2012 one it was form out, when the Pension Funds were forced to hold up the greek government bonds and where herrick at, Pension Funds have a double whammy. , then hit byaircut the recession. The number of people working, in work, and contributing to the pension fence funds crashed. You cannot mend the expansion will system simply by cutting further. Further cuts of the imf, for , belttightening, with lead to a further declining in aggregate demand and Economic Activity which would reduce employment further and reduced contributions to the pension fund. We need to arrest this crisis. You cannot do it simply by cutting. Alexis tsipras knows that. Guy he is pursuing this at this point in time because he is that she knows it is time to read review money. He capitulated to a series of policies that he knows were failing that were pushed upon him who from people who knew they were failing. Guy what is he doing . Is what we have been doing for five years and greece. Extending and pretending. Pretending that the insolvency of the greek state and of the Banking Sector can be overcome thatw loans and measures shrink national income. That cannot work. It cannot work. Everybody knows this. I had a remarkable conversation with someone high up when i was in the ministry. I wont name names, but the essence is simple. This person said to me, i agree with you. This problem cant work. We are committed to it politically. So you regain credibility as the government of greece. You have to accept it. I thought, oh my god. Here i am being told that the Economic Program that can work must be embraced. This is what is happening to europe and the imf are constantly in denial. Guy will greece get the review money . Will pension reform be possible . When summing is unsustainable anis yes, but remember, this is not money for greece. This is expanding and pretending. Expecting one of its markets and putting it in another pretty greek state the greek state borrows. This is not greece. This is not money that goes into some kind of investment for recovery. The money will be given because they want to pay themselves. This is spending and pretending exercise that we are witnessing. Pension funds will be cut. Pensions will be cut. This is not a reform. Taking a meat cleaver and cutting is not reform. Surgery is reform. What we needed in greece was to find a way of putting together policies, Social Security policies and rationalization of funds. Together with the Development Strategy involving private days privatization and using public assets of the state as collateral in order to make a homegrown investment stream into these Capital Assets in order to her improve their value and to bring all of this together so that profits from these investments of the state can be utilized in order to recapitalize Pension Funds while at the same time i would be in but notducing touch the lowest of the tensions which is now what is going to be touched. We should be doing opposite of what we are doing. Guy but this is what is happening. You said it is extend and pretend. All parties are playing the game at the moment. The reason why we had a crisis was greece decided that the music was going to stop. Is the reason we are having a terrible crisis is that in 2010, the parties in the imf decided to cover up a bankruptcy and treated as a liquidity problem. That is why greece is in this. Someone said we dont think this is sustainable. Yanis that isnt sustainable. There is not a single economist i know who believes this is sustainable. It is a tragedy that we keep extending and pretending the situation. Guy one visit stopping sustainable again . Yanis human when will go back to report . You mean when . The economics is definitely going to lead to another failure in greece. Exactly one it will happen, it is impossible to predict. It will happen. No doubt about that. Lets be practical. Guy i know you said it was impossible. Next year, how long would you give it . Cant see stability, even with this bad equilibrium and deteriorating equilibrium being maintained for more than a few months. People are suffering increasing increasingly every day. Europe is fragmenting increasingly as a result of the policies that are being applied in greece and transferred to portugal and elsewhere. You have to understand one thing. This was my experience. There has been no serious debate about who to stabilize the Greek Economy. Why . Because Collateral Damage in a broader game between paris and berlin. They have not worked out what they want to do with the eurozone. The eurozone is not sustainable. The French National budget is that which berlin has its eyes set up on. Greece is not going to be allowed to be stabilized until and unless the two great powers of europe work things out amongst themselves. Guy lets leave greece for a moment. You set up a new organization, a forleaning organization the question people are asking on cells in london, have you had a conversation with Jeremy Corbyn in the labour party . Is my view, unlike many of britaintriots is that is essential for the European Union and for us, who are interested in democratizing the European Union, who do not accept brussels, it would be a tragedy if we do not have this conversation. We are in communication with the labour party. In communication with a green party and lots of people in britain including conservatives who want with us to create an escape from this dreadful dilemma, false start, between either accepting democracy freezone that we have more fragmentation. Retreating to nationstates here there must be a third, better way. We are in communication with many people in this country. Guy youre in conversation with Jeremy Corbyn . Yanis im not point to mention details. The communication is quite productive. As always, a pleasure. Thank you very much indeed for your time. Foreign former greek finance minister. Back to you, david. David that was guy johnson in london with young surfactants. I think that was an extraordinary interview. What was your reaction . John one was that he has one big thing wrong in one big thing the big thing he is wrong is the idea that greece to need to change. Pensions in greece were outrageous. People could retire in their early 50s on virtually full pay. It was part of the Public Sector which she did very little to reform. The only good thing he could have done was introduce a petition into the. He didnt do that. What he had right is that everyone into this can down the road. He is right about the fact that it has a lot to do with france and germany and that something is coming. Happening inhat is europe, you have the programs of greece, portugal, and this added edge of migration. A lot of those migrants are coming up through greece. Things are not looking particularly good at the moment. Stephanie is that because we are talking the eu or investors . They just need the Greek Economy to do well enough to stumble along but they dont actually care about the greek people. People thethe accusation of people like varoufakis will always make her the energy to forgive greece and save, lets start again. Lets treat it like a company, that is what is happening for each time, we have ended up with a choice between doing nothing or doing another slight fix it. They have done too many fix it. Youre just trying to see it in portugal. People are getting angry. People have been out of work for a long time youre there are a lot of frustrated young people. Even if they havent led by weree like varoufakis largely to blame for a lot of these problems. Stephanie this is an extra ordinary morning. It is always an honor to have you. What an interview. Guy johnson, phenomenal. Our own bloomberg editor and chief. And im taking a look, it is 9 03. David time for our third minute. We are 26 minutes and 15 seconds away from the opening bell in new york. Fascinating interview by guy johnson good that get a check in the market with matt miller. Matt if you are just waking up and tuning in, you have to see the real obstruction done overnight in china. Half 1 trillion of market cap was wiped out. The shanghai, down 6. 5 . European markets followed with drops. Have since turned around. Here, you see a live trade of the dax that has been down and now it is up. 25 . The reason is a turnaround we saw in crude futures. Take a look at the marks contracts for wc i. It was down 3 only came into work but it is since turned around and risen because of talk , reports that the saudis are in talk, possibly, to cut some production. What they say and what they do as far as production cuts, historically, there is a gap there. Right now, oil of 2 and 30 and 87 cents a barrel. That drives up stock around the world where they are trading in cash life. They correlation has been so strong. Take a look at futures here. A strong correlation between u. S. Futures and oil, as well. Right now, s p futures of. 4 . We are seeing doubt many contracts up 61 points, may 4 gain on the nasdaq. 4 gain on the nasdaq, as well. Haveng at the terminal, i this function assures the seasonality of breakdowns of Market Movers by months. Right now, we are in 2016. This is an average. 2016, january down a. 2 . The worst january we have seen since 2009. If we get improvements today, we will move up there a little bit. Actually, it is january 26. I dont see us beating 2008. I think we will stay in the level. I also want to show you, because there is so much talk about the. Ed, a terminal function, ec os if use is to with fed funds futures, you can see were the rate toxpect go. Right now, it is very interesting. Futures are pricing in no chance of a move in march. Economist are saying, as you can see from the chart, that there is a rate between 0. 5 and 0. 7 . That is a very interesting look. People like joe over at Deutsche Bank, people like people and nih global. They are expecting a higher rate in march. Even with the turmoil we have seen in markets. Now, over to vonnie quinn with first word. Vonnie thank you so much. Claiming responsibility for bombings that killed 25 people today in syria. The staterun News Agency Says a government tech point was targeted. Folks ending to and looking to end serious civil war will resume friday in geneva. Video attacking plant parenthood, the people. Esponsible are indicted a texas grand jury says planned parenthood did nothing wrong. They are accused with tampering with government records, a felony. Federal Armed Services and washington, d. C. Are closed again because of the big snowstorm. Used in seaboard travel is gradually returning to normal after more than 2500 fights were canceled or delayed. Dayal news 24 hours a powered by 2400 journalists and more than 150 bureaus around the world. I am vonnie quinn. Stephanie while we are in new york city, i can hear people in buffalo gasping and laughing saying, it is just another tuesday. You not just give stories of weather, the three stories that matter to markets. With us, our coanchor, Lisa Abramowicz and priscilla, the global ladies, welcome. Nothing better than three women on this set. I love it. David i dont mind it a bit. Stephanie how about number one . China stocks. We have to cover china. Tumbling to the lowest level in 13 months. Outflowncern, capital will accelerate as the company the shanghai composite closed down 6. 4 , not a pretty picture. Priscilla, what do you make of this . We are seeing is there is concern in the markets that china cant engineer this soft landing. Some of their intervention, people are now tired of it. Lets kind of get to a level where we need to get. I think it is a market repricing their expectations. Stephanie this also raises questions is china committed to propping up the value of the shanghai composite . Which seems to be what they were trying to do. How much money do they have left given their foreign currency reserves that have been heavily depleted . They have 3 trillion but how quickly are they willing to go through that . David john just left, but he does an interview with Vice President lee saying he would do whatever it took to probably market. Now, we got up and it is down 6. 4 . Stephanie the question is, do they have the ability . They may have the intention but to the action heavy firepower . David we will find up your lets turn to the number two story about transactions going on. Lockheed martin announced it is separating its Information Systems and Global Solution division and will combine that unit with Engineering Company a 5 billion deal appeared this morning, the reported profits that the analyst estimates. What do you make of this, persona . Priscilla . Ofy are time off one part the Company Emerging with another slick and focus on those things . Priscilla what you are seeing across the markets and in fixed income markets is that Companies Need to find a way to continue to get topline growth. With slow economic growth, one of the things they are looking to build is are there different Strategic Moves they can make . Barring to do Share Buybacks. All of these are strategies the companies are undertaking to find out other ways. Can you call Share Buyback anything related to growth . Priscilla if youre trying to keep up your multiple and stock price earnings growth, even if youre not getting Topline Revenue growth, is where we are seeing that. We are seeing the ability of that to work diminish as we go through time. That is what youre seeing and the stock market. A correction in your expectations of what companies can achieve. Stephanie lets get you number three, aig plan to return 25 billion to shareholders over the next two years. Ceo Peter Hancock spoke on a call earlier this morning. Peter as far as the wretched divestitures are concerned, there are no sacred cows. We look at all of our business is to the lens of what they create more value if they were in the hands of someone other than ourselves . If so, what is the most efficient way to make that divestiture . Stephanie clearly, hancock is facing pressure. We know who from, carl icahn. He wants them to break into three separate companies. At this point, if you are Peter Hancock, are you just following carl icahns orders because you have no other choice . Hope that one would would not be the whole driver of corporate strategy. Lisa may have an opinion on that. Out, i just want to point if you go to the htf function, you can see carl icahn on sleep with 4 . It is interesting be 3. 4 . You can click on them here and pull up a graph of his holdings, how they have increased over time. In green, then in white, you see aig, how it share prices decrease over time. It he has lost money on this. If you pull up his portfolio, looking specifically at carl icahns portfolio, and look at the effect of aig in his Financial Holdings on the portfolio, they are tiny. Here, you see carl icahn associate folios. This little sliver here is aig. It is only worth. 7 of all of his holdings. Stephanie that doesnt mean he doesnt care. Think about how spoken he has been. David the discussion a stephanie just had, mr. Hancock a be moving toward carl icahn but he has a long way to go before he goes all the way. Asscilla he is not going far saying we do not want to be too big to the to fail. They are not going away and that is what he wants. Icahnnot just carl calling for those changes. On the call, analysts were aggressive. We are not getting a clear plan of what onerun p what is it . What are you doing . Stephanie the heat is on. David more of that story coming. Coming up at 10 00 a. M. On bloomberg tv, an interview with aig ceo Peter Hancock. Autonomy is that . How timely is that . Right now, futures are in the green. We will see. 5 . That is not too bad. 25 from thep up overnight low. Dow futures were down 170 and are now up 60. I love this, david. David we love green. Up next, we take a look at what is moving up and down in free market trading as we come back on bloomberg. Vonnie welcome back to bloomberg. Here is your latest Bloomberg Business . Prompted of a driver for to recall nearly 400,000 ranger pickups. The airbags need to be asked. The defective airbags have led to widespread recalls. The Housing Market is still on a roll. Home prices in 20 u. S. Cities rose 5. 8 in the year that ended november. The home price index says that is the fastest pace in a host a yearandahalf. Disney records say the company is legally replaced u. S. Employees with immigrants. They are suing disney and to Global Consulting companies. The workers came to the u. S. On temporary visas. Say they comply with u. S. Laws. That is the latest Bloomberg Business flash. Matt i want to give you a couple stocks to watch this mine. Sprint is an interesting company. We havent talking about it. It is very highly leveraged. Almost 32 billion in debt. Earnings released this morning show sprint has more cash balance then had been estimated, giving it more time and also added more customers. You can see sprint shares only a three dollar stock, but up 21 in the free market. Big move there. Lockheed martin also a stock that we have been focused on because of the breaking stories that it is going to spin off its i. T. Tech business and purchase or combine with the tech business. Down 3 ase, the stock right now. It will hold 55 of the business. Investors dont seem thrilled with the terms of this. Finally, Procter Gamble. You can see the shares trading up almost 2 in the free market. Better thanhad estimated earnings because of cost cuts. Also, because of price increases. This is where it gets fascinating with Procter Gamble. It has had volume drops that you can see from the Bloomberg News story i have pulled out. By it has a great chart in it. I cant make as chart myself. I dont know how to make this chart. She has done a great job showing the volume losses and price increases that are offsetting that. I would recommend going to your terminal or the website, bloomberg. Com, and checking that out. Investors are anxiously awaiting apples next earnings report. We will give you a preview and we come back next. Stay with us here on bloomberg. David sprint shares are soaring in the premarket after reported thirdquarter earnings that beat analyst estimates. The company is still losing money and it added fewer new monthly subscribers than people expected. It is limiting 7 of its staff as a plan to cut 2. 5 billion in costs which will not be enough. Just how important is it to credit markets broadly for this company to survive and thrive . Bloomberg editor at large is in san francisco. Priscilla and lisa are here with us. Take us through this. Lisa this is the most actively bond market. N the bonds are popping in response to the fact that they do have more cash reserves then people were expecting. It does look like they are not going to default imminently. Their bonds dropped more than 39 in some cases. Pricewise last year. After being downgraded, after going through more cash than people were expecting, and this is a company that is one of the biggest issuers in the highyield bond market. Accounting for 2 of the 1. 3 trillion u. S. Market. It is a massively indebted company. Finally, it was one of the leaders of the markets outside of the Energy Sector last year in september when it was downgraded. More people were expecting by the running agencies. Stephanie what does this mountain of that main . Highlyla they are leveraged, but wanted reasons you see them try down so much as they are so liquid. They are 2 of the market. Liquidity is a driver in and of itself. You are sprint, it is unfortunate you have such big issues. Those bonds are in a multibillions. You are the guy who sells them first because who gets solved first because youre the only option. Priscilla exactly right. Cory 7 billion and the next three years. No accident they have to keep her he is in. One of the issues as well as on the Positive Side of the Balance Sheet. The value of the spectrum they have yet to deploy is unclear. Great value to that. Until that gets the point, whether or not they can fall back into a system where there is another buyout and there is no fire out there, the tallies they have is diminished, indeed. Matt i just wanted to point out the debt distribution. This is a function im sure priscilla and lisa are familiar with. It is a great chart that shows you just how much of their 32 billion debt is coming to in the next couple years. They have a big revolver open, but this is 2 billion, 3 billion, 4 billion in debt coming due between now and 2024. It goes out all the way to 2040. They really do oh a lot of money. Guys e this israel, this is real, guys. Matt if you are worried about puerto rico stephanie sprint has more customers and puerto rico. David lets go back to cory johnson on the west coast. We want to talk about one of her favorite subjects, apple. We will get to the Earnings Announcement at the end of the market today. What are we expecting . Do want to ignore the most obvious thing which is the production of iphone sales that will end in june. Everyone knows it is a big issue. Apple is in the midst of a big transition were have gone from this worlds like over were participating in smartphone growth upwards of 40 across the industry three or four years ago. Now, we are looking at singledigit growth for the industry. Maybe they can grow faster than that. Apple has to go through a transition where they become more like a service and less like a hardware slinger. The declining service of the ipad, they growth and market share of the mac, the question of growth on the iphone maps a bigger trend about moving more toward a Service Oriented company through subscription to the latest iphone or through other things like music and other services they can offer. I think those are the longterm issues regular cash flow that might benefit apple that investors will be looking for. Stephanie you think Service Oriented Company Makes me think serviceoriented economy. Tim cook has been outspoken up he is bulled about the china opportunity. What does that mean now that we are in a serious slowdown . China is 21 of sales for apple on an annual basis incredible considering where they were a few years ago. Essentially zero. Their growth and china has been a growth throughout angiography as much as growing within a country. Now, they are looking at yearoveryear, they will see in slot they will see slowing growth in china regardless of what is going on in the economy. David you are describing a fundamental shift in apple. They were always selling their gadgets. What are the services that we take that slack up . Cory the interesting thing is the way to have established a deal. A customer can subscribe to a latest iphone, have a monthly charge that includes the hardware with their cell phone bill. It guarantees them the next iphone. What that does is locksley money into the iowas operating system. It means they are likely never to switch onto android or anything appeared it locks them onto the apple operating system. It suggest that people will have a monthly apple bill. In some cases, it will include music, some cases, it wont. Some cases it will be the watch and phone, sometimes just a phone. It would be like a cable bill. That changes the dynamics around Free Cash Flow generation for a company and how long you can discount those numbers. Stephanie i have a monthly apple bill. I feel like i buy a new apple products every month. Cory johnson, thank you, priscilla, youre sticking with us. When we come back, were talking more about the fed meeting ticking off in d. C. Today. Stephanie you are watching bloomberg. Less then 30 seconds from opening bell. Futures in the green. The fomc beginning it two day since raising rates in december today. We are asking how much will the china slowdown and market worries dominated the conversation. Braving the elements, Lisa Abramowicz and Priscilla Hancock still with us. Janet yellen says she is data dependent. Last summer, Christine Lagarde said janet yellen, across the pond, we are suffering. But janet yellen looked at the jobs number and said we are raising. Changed frome has their perspective. Globally, picture has not changed that much. We are still dealing with deflation. In hindsight, it will probably end up as i policy mistake. Whether they admit to that is doubtful. For now, they will stick to the script. Perhaps the more data dependent like. Than they would if they change spare to win, it would be in march or later. What data are they paying attention to . Just u. S. Or around the world at places like china to europe whether it makes sense . The only did they are dependent on is employment. That is the thing they have focused on more than anything else. Rightly so. If you have substantial wage inflation, you will have a problem down the road. But the rest of the economy is not as strong. You look at the industrial ,ector, energy, materials transportation. All of them showing signs of weakness. It is a question on if the fed will Pay Attention to those sectors above and beyond single really focusing on employment. David priscilla, what would you like them to do . Priscilla is awesome. [laughter] priscilla that would be nice. They cannot do much. Yes, they can stress data dependency. They can soften their view of the economic investment. They should do that. I think they mentioned the fact that they look at International Development. In september, we saw that they backed away because of International Development of volatility. They will comment on inflation i hope they do. To go int is hard march, but i think the event i think the fed has set the bar inset high for us not to go march. There are willing to accept a little volatility. The market once to say they will not go in march. I do not think the fed is there. Is a problem. The economy in the u. S. Is showing significant signs of stress. If they ignore it, they do so at their peril. Will we see another round of 20. Easinground of quantitative eas . On a globalngs basis have not changed much. The employment picked up at stresses we were dealing with are still with us. Therefore, tightening because employment looks good and inflation is going off a cliff. Priscilla we are not seeing the pressure on wages. There is the question that people are staying in jobs because they want health insurance. I think you could see easing. Go the u. S. Re economy is stronger than it was during the financial crisis . Krishna of course. The growth rate is 2 . It is not as though we are not growing. We do not have the inflationary pressures we need for the fed to come down hard. Priscilla among those are wage pressures. Is driven highyield by energy prices, largely. But what may look at the capital structure, those who want to step back into the market are looking more favorably at high it is a matter of being high above the water. Will that trend continue . Krishna corporate spreads are very wide. We all talk about it a lot. Corporaterelative to fundamentals and offer good value. But the likelihood that Corporate Bond spreads tighten significantly in the face of potential fed tightening is small. I think they offer good value, but you have to be a longterm investor and you have to make sure that at some point, your expectation is that the fed will get off its high horse. Stephanie how long is longterm . Accepting hiss losses, telling investors i will put my own dough behind this. That tells me there are investors who look at this market like in 2008 and 2009. Does it look similar . Krishna first, we do not have the same level of destress. Asthe recovery would not be substantial. We are dealing with a potential slowdown in the economy. By the end of the year, the fed tightening starts dating fading. If you want to be longterm, take a two to threeyear view. That gives us value. Should the economy deteriorate, does the fed have more . Krishna the fed can do a lot. About it a lot, and that can have impact. Because the rates are at zero, saying that the fed cannot do anything is not giving them credit. They have lots of tools and communication is an important tool. They can make a world of difference. I do not think they are inclined to do that in the short run. Krishna yes. David thank you, priscilla, for being with us. Krishna will stay with us. We are coming up on seven minutes into the trading day. Lets go to matt miller. Screenreen across the after the big slump yesterday. The s p adding 13. Up 142. Jones industrial gaining not as much. Just about half as much as the major indices. The nasdaq up 4 10 of 1 . This illustrates that point. Worsttocks the second gainer. Because all Industry Groups are up. Health care is the worst the smallest gain or. Energy, utilities, financials are the biggest winners. It is about the price of crude. Oil was down this morning and has turned back up. Oil up 1. 4 . It is still a gain as there is talk of saudi arabia having talks about the possibility of inking about a production cut. Of thinking about a production cut. Too not want to make it concrete. Dupont, 3m,gamble, storiese cost cutting or price raising stories. Dupont unchanged now, but beating as it shifts sales away from medical devices. I want to take a look at some carl icahn moves. A small stock that carl icahn has a big stake in, Freeport Mcmoran copper. Spinoff andg a getting closer to that 20 ipo suggested that icahn to spin off. So gaining traction in a battle he has been losing. Today not a bad day for him. Go to Abigail Doolittle, because she is looking at another stock index carl icahn has significant holding. Abigail apple not in the green. Down nearly 1 . The bake Earnings Announcement for the holiday the bake big earningsnt announcement highly anticipated. We will see whether we have a slew of analysts questioning the nearterm but positive on the long term. When there is a consensus opinion, you also see some sort of take surprise in volatility. Stephanie things to Abigail Doolittle at the nasdaq. When we come back, we are talking Luxury Real Estate. We are seeing chinese, russian buyers. Why highend homes are feeling the heat. You are watching bloomberg. Vonnie welcome back. Twitters top managers are holding a retreat to discuss the companys future. Twitters stock has fallen 57 the last year and it was downgraded by Goldman Sachs. Reporting lower than forecast earnings. The company dealing with weak demand for its agriculture products. To letnt obama wants Small Businesses pool their offer plans so they can retirement. The president will include his idea in his upcoming budget. That is the latest Bloomberg Business flash. David caseshiller came out with their numbers. Earnings rose 5 . But there was one part of the Real Estate Market that is not doing so hot. That is luxury. The economic woes from china to south america seem to be dampening sales. Joining us is Leonard Steinberg, president of congress. Krishna and lisa are still with us. We hear the bloom is off the roads in places like new york and miami. Yet, butit is not bad a reality check has set in. Seeing a germanic level of price adjustments, mostly on prices that we are seeing a dramatic level of price adjustments. Essentially more than one buyer, which is healthy. So is this because the dollar has strengthened so much . Leonard the mood of the market is everything. So on the highend luxury, the buyer is more driven by the mood than the money. Wall street and the wealthy are interconnected. When you saw issues in china in late summer, that immediately impact of the chatter. Since the year began, we have seen a correction around 10 . That impacts the mood of the market. But we are early into the year. Given the substantial volume of price adjustments, they are mostly on crazy prices. Stephanie how about Luxury Real Estate used to park cash . Super highend buyers will always want Extraordinary Properties to live in. But we saw chinese and russian buyers buying apartments just to park cash. I think that market is a wait and see. Something to be said about the resale yens real estate about the resilience of real estate as an asset class. In some countries, where you have seen traumatic drops dramatic drops in their currency, real estate seems to be a wise investment. The wealthy are speculating it is a better territory than people who do not have the money to speculate. Lisa what are you talking about the price range with altra highend ultra highend . Misused luxury is a word. Luxury is a rich and noble is a regional prospect. Luxury in different cities starts in different price points. In manhattan, people think it is above 5 million. Above that and above 10 million, you will have areas of corrections. But the millennial audience is looking for under 3 million. Stephanie and bidding wars are still happening there. To keep thiss fair up her from the u. S. Housing market. Housing is probably one of the theets of strength and economy. Consumer employment is better. Interest rates are lower. Prices have come back. If you talk to builders, there is decent strength in the regular u. S. Housing market. If that crashes, then we will have a problem. Stephanie so crocs we are miami. For like in 2006, 2007, it was the super highend market that cracked. But back it was a window into the rest of the Housing Market. Things there are two that were going on back then there are not happening now. In the regular Housing Market, there is not a speculative bubble. People are not buying to slip their properties. What it showed is that when that stopped, whoever is speculating would be looking to get out. We are not there yet. The strength of the u. S. Housing market depends on whether all of these people who have been in multi family and living with setr parents, will they their own families of and buy a new house. Were seeingt, we progress. If that stops, we will have a problem. New u. S. Ere is a treasury regulation that prevents people from being anonymous eyes they buy these 100 million eyes they buy these 100 million homes. Does this have an impact . Leonard it will be so fractional as to be insignificant. One thing different is that the banks have been more tough in lending practices. If you look at what it takes for a wealthy person to obtain a mortgage, it is not easy. That will help with the market. Stephanie how . Are people at that level markers dependent at that Level Mortgage dependent . Thatrd the volume of cash exists in the market is extraordinary. Think the point of mortgages and banks is important. The conditions in the Mortgage Market is not anywhere close to where they were in 2006 and 2007. It is the least of our worries. Stephanie what is your biggest worry . Krishna that people get scared and stop buying new houses. Because they get worried about about the fact that the economy is slowing. That is the biggest risk. David Leonard Steinberg her, the president of congress. Krishna memani is staying with us. When we come back, the top moments of our program. Stephanie you are watching bloomberg. The dow and s p rebounding. Oil jumping 2 . Lets take a look at some of todays conversations. The underlying u. S. Economy is growing about 2 . The fed is tempted to look through shortterm volatility. But if this persists, they will not be able to look are what. China is a longterm play. With the demographics, the immensity of health care plays well for our business. China represents only 5 of our sales. Slowdown ore shortterm Economic Conditions will not have a Significant Impact. Can adidate for a gain broken economy like this, can we found them recovery, when businesses where forest in the last couple of months to a prepay percent of their Corporate Tax for 2016 in 2015 . You wanted to recover after eight years of permanent recession. But beforeo go, that, final thoughts from krishna memani. Look at theyou markets, there are tremendous values being created. Investor, a longterm the key word is longterm. Twoputted three years. In that timeframe, two to three years. Need anear term, you catalyst. The only catalyst mario draghi approved is the central banks. Beyond that, we will not have significant turnaround to drive markets higher. I am looking for the fed to try to call down calm down the markets. Two to three make calls when you need to be paid at the end of the year . Krishna our investors are longterm. Are decent companies that have been thrown out with the bathwater. They gave tremendous value. You see what carl icahn is doing. There are plenty of value plays in the market. Do you think a nonactivist investor should get out . Krishna no. There are plenty of value opportunities. If you are a longterm investor, there is tremendous value. Last spring, there were distressed investors who thought mlps looked good, but they kept going down. Somena true, but at point, it stops. Stephanie it is called bankruptcy. Krishna for bankruptcy, you need the operating performance of the company to interior eight significantly. That has not happened. It is concern about oil and about potential troubles. Stephanie time for an iron gut. Krishna memani and thank you to our Lisa Abramowicz. Tomorrow, we have an exclusive interview. A. M. In new york 11 00 p. M. In hong kong. Welcome to bloomberg markets. From bloomberg world headquarters, good morning. I am matt miller. An hour into the trading day, u. S. Markets are mostly higher. But there was carnage in asia pay the shanghai composite plunged more than 6 . So our fears of a china contagion coming to an end . Aig will return 25 billion to shareholders. His this move enough to silence criticism . Apple said to report earnings after the bell. Down 13 the past year. Can apple regain momentum and keep iphone sales growing . Skts head to the markets